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SA-UK trade relations: More room for growth

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Graphic: Timothy Alexander / African News Agency (ANA)

By David Monyae

South African President Cyril Ramaphosa toured the United Kingdom (UK) on a state visit from 22 to 23 November upon the invitation of the newly crowned King Charles III.

He also met with the UK’s new Prime Minister Rishi Sunak to discuss matters of mutual interest between their two countries.

Coming in the aftermath of important political changes in the UK namely the UK’s withdrawal from the European Union (EU), the crowning of a new King following the death of the long-serving monarch Queen Elizabeth and the election of a new Prime Minister, the visit provided an opportunity for the two countries to take stock of their relationship and chart a path forward.

Picture: Yui Mok / POOL/AFP – South Africa’s President Cyril Ramaphosa, left, is greeted by Britain’s King Charles III, watched by Britain’s Prime Minister Rishi Sunak, right, during a Ceremonial Welcome on Horse Guards Parade in London on November 22, 2022, at the start of the President’s two-day state visit.

It is also the first since the advent of the global Covid-19 pandemic, which had a far-reaching and disruptive impact on the global economy.

Although the pandemic has since subsided, the world is still trying to adapt to its legacy. Since the inception of democracy in South Africa in 1994, the relations between the two sides have grown in leaps and bounds across the economic, diplomatic, and socio-cultural realms.

Indeed, a few things symbolise the strength of the UK and South Africa’s relationship more than the presence of South Africa’s first democratically elected president Nelson Mandela’s statue in the Parliament Square in London. Such artifacts serve as expressions of shared values of freedom, democracy and human rights which underpin the two parties’ relations.

The countries established a Bilateral Forum in 1997 which convenes at the foreign ministry level every two years to discuss matters of common interest and nourish their relations.

Since the two countries share an important economic partnership, it is not surprising that economic issues topped the agenda of Ramaphosa’s visit.

According to the UK’s Department of International Trade (DIT) in the one year between July 2021 and the end of June 2022, bilateral trade between South Africa and the UK reached US$12.9 billion dollars which represented a growth of almost 7 percent and made South Africa the UK’s largest trading partner in Africa.

South Africa’s exports to the UK reportedly support over 140,000 jobs which goes a long way in helping the government achieve its objective of poverty alleviation. However, with trade between the two countries accounting for only 0.7 percent of UK’s total trade and 8 percent of South Africa’s total trade, there is certainly more room for growth. The UK is one of the most important sources of foreign direct investment (FDI) for South Africa. The UK’s FDI stock in South Africa amounted to US$23.4 billion in 2020 which was about 17 percent of the total FDI stock in South Africa.

Companies from the UK invest in various economic sectors including banking and finance, mining, technology, construction, and hospitality among others. On the other way round, South Africa’s FDI stock in the UK in 2020 was estimated at US$4.8 billion. However, South Africa attracted only 1.2 percent of the UK’s total outward FDI while being the source of only 0.2 percent of the UK’s total inward FDI. Therefore, as in trade, the investment relations of the two countries have the potential for more growth. Hence, during his visit, President Ramaphosa addressed the UK-South Africa Business Forum in a bid to attract more UK businesses to South Africa.

He stressed that his government was hard at work improving South Africa’s business environment through infrastructure development and regulatory reforms. As the UK is trying to find its place in the world in the aftermath of its exit from the European Union (EU) and tries to improve the resilience of its supply chains whose vulnerability was brutally exposed by the Covid-19 pandemic, South Africa has the potential to be an important strategic partner. Even more so as a gateway to the broader African region.

Beyond bilateral issues, UK and South Africa’s relationship is also affected by global and regional issues which found their way to the agenda of Ramaphosa’s trip. At the regional level, the two parties would have discussed the implications of the UK’s withdrawal from the EU and how to adapt to them. On the African side issues including sanctions on Zimbabwe, the African Continental Free Trade Area, regional and continental integration, peace and security in countries like the Democratic Republic (DRC), Mali, and Mozambique among others also featured on the discussions between the two countries.

Ramaphosa has strongly lobbied for the lifting of economic sanctions on Zimbabwe imposed by the UK and other countries in the West. He has argued that the economic stagnation in Zimbabwe which resulted from the imposition of sanctions is a potential threat to regional stability. At the global level, issues such as the Russia-Ukraine war, climate change and the Covid-19 pandemic also featured on the agenda. On the Russia-Ukraine war, South Africa and the UK have different policy stances. While the UK has actively supported Ukraine including through military assistance, imposing sanctions on Russia and campaigning for the isolation of Moscow at the United Nations (UN), South Africa has insisted on a negotiated solution to the war and pushed back on efforts to isolate and sanction Russia.

On climate change the UK is one of South Africa’s partners on Just Energy Transition Partnership (JETP), which seeks to expedite South Africa’s transition from fossil fuels to clean and renewable energy sources. A deal worth US$8.5 billion in climate funding was signed between South Africa and the UK’s partners meant to facilitate investment in clean energy infrastructure. However, President Ramaphosa has previously stated that this was not enough as more money was needed to wean South Africa off fossil fuels.

Moreover, the relations between the two countries were strained at the height of the Covid-19 pandemic as Ramaphosa was one of the African leaders who castigated the UK and other wealthy nations of engaging in vaccine nationalism which undermined Africa’s access to Covid-19 vaccines and other medical materials.

The UK also did not support a South Africa-led campaign at the World Trade Organisation (WTO) whose aim was to waive intellectual property rights on Covid-19 vaccines to enable African countries to start manufacturing their to avoid the supply bottlenecks that were derailing the continent’s fight against the pandemic.

David Monyae is the Director of the Centre for Africa – China Studies at the University of Johannesburg and Sizo Nkala is a postdoctoral fellow at the same Institute.

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